Diversification in finance refers to the practice of minimizing risk by investing in a variety of industries or companies rather than focusing on a single industry or a small number of companies. This strategy aims to reduce the impact of any potential losses in one specific area by spreading out the investment across different sectors. By diversifying, investors can potentially protect themselves from significant financial downturns and maintain a more stable portfolio. It is a key concept in risk management and a crucial aspect of successful investing.
